How to start a business as an Expat in the Czech Republic

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Starting a business is no easy task. Doing it in an entirely different country with a new language and customs is even more challenging. The good news is that the Czech Republic is very supportive and open to expats starting businesses in various fields. The rapidly developing economy, along with their favourable tax environments compared to other EU countries, affordable rent, and low cost of labor, make starting a business in this beautiful country both appealing and promising. 

With that being said, if you’re interested in starting a business in the Czech Republic, you have some work ahead of you. You will need to take the time to enquire on conditions and formalities, figure out all the details and follow all the proper steps, ranging from legal compliance, accounting, registrations, taxation laws – which you need to complete on time to avoid penalties, setbacks, and interest.  Along with the required permits, business licenses, and registrations, you need to figure out the local labor laws and employment practices. If you’re interested in opening a restaurant, pub, clothing store, or whatever your heart desires, the bottom line is, it’s not as easy as 1,2,3. Ideally, a law firm that can provide a One-Stop service could help reduce your costs. It will reserve management time for focusing on core activities, as you do not have to contact various service providers directly to help you with different activities. Lucky for you, those law firms exist.

Below is a simplified guide of the most important steps you’ll need to become a business owner in the Czech Republic.  In order to successfully and thoroughly understand and implement all that is legally required of you, it is highly recommended that you seek professional legal advice from reputable law firms like Legans Law Office.

To get you started, it’s important to note that there are four main types of companies in the Czech Republic:

  1. Limited Liability Company (společnost s ručením omezeným – s.r.o.)
  2. Stock Corporation/Public Limited Company (akciová společnost – a.s.)
  3. Limited Partnership Company (komanditní společnost – k.s.)
  4. Unlimited Liability Company (veřejná obchodní společnost – v.o.s.)

To be clear, there are other methods for starting a business here in the Czech Republic, but the ones listed above are the most common.

Choosing The Form of Your Company

Once you’ve determined which type of company you’re going to create, the first thing you need to do is select the right form for your company. To do so, you’ll need to consider the needs of your eventual business. For example, how much capital you will need, the number of shareholders you will have (if any), and what is required in terms of insurance or liability. 

Choosing the right form for your company depends entirely on which company you intend to open. All these procedures can be pretty confusing and challenging, which is why it is HIGHLY recommended that you seek out legal counsel to ensure you’re making the right choices and heading along the right path to becoming a legitimate business owner.

Basic Procedures

After you’ve chosen a form for your company, to set up a business in the Czech Republic, you will be required to submit the following documents:

  • criminal record of all involved in company incorporation
  • documents proving the absence of any associated taxes arrears
  • sworn statement and specimen signatures of prospective managers before a notary. 

Once you’ve submitted the documents listed above, the company’s head office address has to be specified either by producing a lease contract or an extract of the land registry if you are the owner of the property where the company will exist. Next, a notary will need to create a notarial deed, company’s statutory body, and contract.

We hope you’re following so far; let’s continue to the next step.

Opening A Business Account and Registering Your Company

When starting a business in the Czech Republic, you are required to open a bank account in the company’s name in which you will deposit the capital. The bank will request a copy of the company’s contract and issue a written statement regarding the payment of shares. The company must be registered at the Office of Trade and Crafts, where a permit will be issued.

You also have to register the company at the Trade Registry within 90 days following its creation date. The application form has to be submitted along with the following documents:

  • two copies of the company’s contract as registered by the notary
  • the manager’s confirmation regarding the investment of shares
  • the bank’s confirmation regarding the investment   
  • legal documents regarding the use of the premises
  • a lease contract or an extract from the registry of real estate properties
  • sworn statements of managers along with their specimen signatures
  • excerpts of the managers’ criminal records
  • a tax stamp of CZK 5,000

Next, the company must register at the Social Insurance Administration and Health Fund within eight days following its registration at the Trade Registry.

Last Steps

Once you’ve received notification that your registration is processed, congratulations, you’ve managed to complete a large part of the most time-consuming details and steps, but don’t get too excited; there is still work to do! At this point, you’re probably wishing you had a professional helping you sort out all of these details for you. Well, you can’t say we didn’t warn you.

Now you need to ensure your company’s all set in terms of relevant legislation like taxes. Based on the scope and nature of your business, you’ll now need to file for a few more registrations. They are as follows: Income Tax, Circulation Tax, and if your company owns and uses a car or cars for business activities – road tax and VAT. Lastly, you need to register your company with the Central Registry of the Identity of Beneficial Owners.

Next, you’ll be set up with a data box for the company. You will need to activate the data box within 15 days of receiving the login and activation details and guidelines. The purpose of the data box is primarily for official communication from public authorities and the submissions of authorized applications.

Final Thoughts

As plainly as we could put it, those are SOME of the essential steps in starting a business in the Czech Republic. Again, there are many conditions and requirements that are not listed in this article, but we hope you have gained some insight into how intricate and time-consuming the process really is. After reading through this article and trying to make sense of all the details, actions, and requirements, your head is probably spinning, and you may be having second thoughts about becoming a business owner after all. But, have no fear, this is precisely why legal advisory companies like Legans Law Office exist. To make your life easier. At least in terms of becoming a business owner in this fine country. 

Law offices like Legans offer comprehensive legal services in the scope of completing all formalities and assistance in obtaining necessary permits and concessions. They not only help you successfully manage all the detailed steps listed above, but they also bridge the language gap, which as an expat, can be one of the most challenging aspects of this whole, already complicated process.  

In writing this article, we hope we could offer you some helpful information regarding the fundamentals of becoming a business owner in the Czech Republic, but most importantly, you can do so without losing your head in the process. So, do yourself a favour, save a lot of time and unnecessary stress, and entrust Legans Law Office in helping you realize your dreams of becoming a business owner in the Czech Republic; you won’t regret it.

Article by Chantelle Switzer Tuma